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Module 6b

Retirement and Estate Planning > Planning for a Secure Retirement > Module 6b
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Module 6b: Defined Benefit

John works for an employer who has a "defined-benefit" pension plan. John may be eligible for a benefit based on the number of years worked, average of his salary for the last 3-5 years, and a percentage that is stated in the plan.

In this type of plan, the number of years worked may need to be a certain number such as 10, 15 or 20. Or there may need to be a combination of years worked and employee's age. (Note: it is important to learn what the requirements are for your employer's plan.)

Question:

John plans to retire next year after working for the employer for 30 years. His average income for the last 5 years was $45,000. John knows that his annual "benefit" will be 1.5% or 0.015 * the number of years worked * his average annual income during the last 5 years of employment. What will John's benefit be?

Answer


Module 6 - Module 6a | Module 6b | Module 6c | Module 6d | Module 6e